Siemens orders drop as plants, clinics delay spending

Siemens AG, Europe's largest engineering company, said first-quarter orders dropped as manufacturers ran down stocks of automation equipment and U.S. hospitals postponed purchases of scanners.

Orders in the three months through December decreased from a year earlier to about 22.2 billion euros ($29.3 billion), the Munich-based company said in a presentation on its Web site today. The inflow of new work was unchanged from the fourth quarter.

Chief Executive Officer Peter Loescher is combating a slowdown in demand with a 1.2 billion-euro savings program which includes 16,750 job cuts by 2010. A "challenging market environment" has made customers more sensitive to prices and put pressure on margins, Chief Financial Officer Joe Kaeser told a conference in New York today.

"Orders fell significantly in the first quarter because of the global financial crisis," the company said in an e-mailed statement.

Operating profit from the health-care, industry and energy divisions, referred to as sector profit, jumped "significantly" in the period, helped by an increase in sales of about 5 percent, the company said. Siemens posted 1.67 billion euros in operating profit and sales of 18.4 billion euros in the first quarter of last year.

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Industrial production in Germany, the world's biggest exporter, posted its sharpest decline on record as demand for machinery waned, the Economy Ministry said on Jan. 9. Siemens, which makes trains and power turbines, is driving growth in China, India and other emerging markets to counter any slowdown in spending among European nations.

All three of Siemens's divisions have been hurt by the global financial crisis. At health care, the U.S. market for scanners "hasn't bottomed out," and the trend is likely to spill out to the global market, the company said. The industry division's Osram light-bulb unit will continue to see "soft" demand and clients in the energy industry are likely to postpone orders, Siemens said.

The company said it's more "cautious" about the outlook for 2009 and especially 2010.

Siemens, which has refocused its business on power networks, automation equipment and scanners used in health care, has lost 30 percent in the past six months in Frankfurt trading, cutting the company's market value to 44 billion euros.